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JEFFERSON PARISH HOSPITAL SERVICE DISTRICT NO. 1
CO M PREHENSIVE ANN UAL REPO RT AS O F D ECEM BER 31,1998
Under provisions of state law, this report is a public docum ent. A copy of the report has been subm it- ted to the audited, or reviewed, entity and other appropriate public officials. The report is available for public inspection at the Baton Rouge office of the Legislative Audi- tor and, where appropriate, at the office of the parish clerk of court.
Release Date ~AY | ~ I~_ _Q
_o _
EFFERSON PARISH H OSPITAL SERVICE DISTRICT N O . "1
CO M PREH EN SIVE A N N UA L REPORT
AS O F D ECEM BER 31.1998
TABLE O F CON TENTS
1. SERVICE DISTRICT FINAN CIAL STATEM ENTS 2
2. IN DEPEN DENT AU DITO RS' REPORT O N CO M PLIAN CE A N D O N INTERN A L CONTROL OVER FINANCIAL REPORTIN G OF TH E SERVICE DISTRICT 16
3. RETIREM EN T PLAN FIN A N CIAL STATEM ENTS
A RTHUR A NDERSEN LLP
JEFFERSON PARISH HOSPITAL SERVICE DISTRICT NO. 1
CO M BIN ED FIN AN CIAL STATEM ENTS AS O F D ECEM BER 31,1998 AN D 1997 TO G ETH ER W ITH AUD ITO RS' REPORT
To the Parish Council of
Jeffexson Parish:
A RTt ILJR A NI)I!RStiN ] fl J~
REPO RT O F IN DEPt'~N DI~N T PU BL1C ACCO U N TA N TS
W e have audited the accompanying combined balance sheets of Jefferson Parish l Iospital Service l)islricl No. I (Ihe Service District - a component unit of Jefferson Parish, Louisiana) as of December 31, 1998 and 1997, and the related com bined statem ents of revenues and expenses and fund balance and cash flow s for the years then ended. These com bined financial statem ents are the responsibility of the Service D istlict's m anagem ent. O ur responsibility is to express an opinion on these financial statem euts based on our audits.
F, xcept as discussed in the follow ing paragraph, we conducted our audits in accordance w ilh generally accepted auditing standards and in accordance w ith the standards for financial audits contained in Government Auditing Standards (1994 Revision), issued by the Comptroller General of the Dnited States. Those standards require that w e plan and perform the audits to obtain reasonable assurance about w hether the financial statem ents are free of m aterial m isstatem ent. An audit includes exam ining, on a lest basis, evidence supporting the am ounts and disclosures in the financial statem ents. An audit also includes assessing the accounting principles used and significant estim ates m ade by m anagem ent, as w ell as evaluating the overall financial statem ent presentation. W e believe that our audits provide a reasonable basis for our opinion,
G overnm ental A ccounting Standards Board Technical Bulletin 98-~, "Disclosures about Year 2000 Issues," ~'equiles disclosure of certain m atters regarding the year 2000 issue. The Service D istrict has included such disclosures in N ole 9. Because of the unprecedented nature of the year 2(100 issue, its effects and the success of related rem ediatic~n efforts w ill not be fully determ inable until the year 2000 and thereafter. Accordingly, insufficient audit evidence exists to support the Service District's disclosures w ith respect to the year 2000 issue m ade in N ote 9. Further, w e do not provide assurance that the Service D istrict is or w ill be year 2000 read),, that the Service D istrict's year 2000 rem ediation efforts w ill be successful in w hole or in part, or that paJties w itb w hich the Service D istrict does business w ill be year 2000 ready.
in otn opinion, except for the effects of such adjustments, if any, as might have been determined to be necessaly had w e been able to exam ine evidence regarding Year 2000 disclosures, the financial statem ents referred to above present fairly, in all nraterial respects, the financial position of Jefferson Parish ] lospital Service D istrict N o. I at D ecem ber 31, 1998 and 1997, and the results of its operations and its cash flow s fol the years then ended in coJ,form ity w ith generally accepted accounting principles.
In accordance w ilh G overnm ent A uditing Standards, w e have also issued a repolt on our consideration of the Selvice D istrict's com pliance and internal control over financial reporting dated M arch 5, 1999.
N ew O rleans, Louisiana M arch 5, 1999
1
CURRENT ASSETS:
EFFERSON PARISH H OSPITAL SERVICE DISTRICT NO . 1
COM BIN ED BALAN CE SH EETS
DECEM BER 31 1998 AN D 1997
A SSETS
Cash and cash equivalents Patient accounts receivable, less allow ance for doubtful accounts of $10,001,000 hi 1998 and $8,761,000 in 1997
G overnm ent health care program receivables Inventory of drugs and supplies Prepaid expenses Assets w hose use is lim ited that are required for current liabilities
Total current assets
ASSETS W HOSE USE IS LIMITED (Note 2) By board for specific purposes, at m arket Trustee-held assets, at am ortized cost
Total assets w hose use is lim ited
Less m nounts required for current liabilities
N oncurrent assets w hose use is lim ited
PROPERTY, PLANT AND EQUIPMENT, net (Note 3) OT1 IER A SSETS: Unantortized financing costs O ther
Total other assets
Total
1998 1997
$ 2,898,480 $ 7,937,243
26,614,980 6,384,138 2,507,246 5,451,747
~ 47,000
~ 4 9~49003,591
134,809,493 138~ 0028,273
272,837,766
5fG14~
267 690,766
80~ 0056,705
3,652,179
~ 8,592
8.180,771
22,823,191 5,241,558 2A23,259 4,368,064 5,332,000
48,125,315
183,155,847
_ 61,796,663
244,952,510
_ _ (5,332,000) 239,620,5_10
_ 77,892,534.
4,222,157
_ 4,986,'[39_
_ 9,2~ 296
_~ 404~ 31.833 $ ,374j846,65~
The accom panying notes are an integral part of these financial statem ents
EFFERSON PARISIt H OSPITAL SERVICE DISTRICT N O . 1
CO M BIN ED BA LA N CE SH EETS
DECEM BER 31, 1998 A N D 1997
LIABILITIES AN D FUN D BALANCE
CU RREN T LIABILITIES: Accounts payable A ccrued expenses Patient deposits and credit balances
Current instalhnents of long-term debt (Note 4) Bond interest payable
Total current liabilities
RESERVE FOR ESI'IMATED MALPRACTICE CLAIMS (Note 5)
LONG-TERM DEBT (Note 4)
CONTINGENCIES (Notes 5 and 6) FU N D BALAN CE
Total
1998 1997
$ 6,261,676 10,900,431 2,296,093 2,890,000 2,257,333
24,605,533
2,320,000
178,000,000
200,006,300
fa 404~93!j~33
The accom panying notes are an integral part of these financial statem ents
$ 4,731,933 9,867,614 4,090,112 3,515,000 1 816 994
24,021,653
2,100,000
159,449,999
189,275L00~
~74,846,655
A L SERVICE DISTRICT N O . 1
AN D FUN D BALAN CF, COM BIN ED STATEM ENTS OF
O PERA] 1N G REVEN UES N et patient service revenue O ther operating revenues
Total operating revenues
O PERATIN G EXPEN SES: Personnel Professional fees M edical and general supplies Purcl~ased services
D
O ther expense Bad debt expense D eprecia tion Interest expense, net of interest incom e from bond fund investm enls of $5,277,000 in 1998 and $4,692,000 in 1997
Total operating expenses
IN COM E FRO M OPERATION S
IN VESFM E, N T IN CO M F. A N D O TH ER N O N OPERAT1N G REVEN UERS
EXCESS OF REVEN UES OVER EXPEN SES BEFORE EXTRAORDINARY ITEIvl
EXTRAORDINARY LOSS ON REFINANCING (Note 4)
EXCESS O F REVEN UES O VER EXPEN SES
FUN D BA I,AN CE A T BEGIN N IN G O F YEAR
ASSESSM ENTS BY JEFFERSON PARISH (Note 1)
FUN D BALAN CE AT EN D O F YEAR
1997
$ 135,140,671 5.916.758
$ 133,542,554 5,8798~ 2fi_26
141,057,429 1394223~ 8080
62,476,752 6,454,378 25,706,427 11,918,707 10,314,887 10,584,729 9,087,399
3,222~317
139,765,596
1,291,833
13,109,051
14,400,884
__ ~2,~)93,997) 11,406,887
189,275,003
(675,590_)
$_2Q0,006,3,39~
The accom panying notes are an in tegral part of these financial statem ents
60,054,546 6,010,515 23,986,460 11,559,930 10,173,892 9,589,657 8,666,551
__ 4~7~)~920
] 34,7614~Z!71
4,660,909
16,3744~ j21
21,035,330
21,035,330
168,880,976
(6413~ 303)
$ 189,27~Q03
PA RISH t IO SI'rfA L SERVICE DISTRICT
CO M BIN ED STATEM EN TS O F CASH FLO W S
FOR 'fl IE YEARS EN DED DECEM BER 31 1998 AN D 1997
CASt I FLOW S FROM OPERATING ACTIVITIES: Incom e from operations Adjustments to reconcile income from operations to net cash provided by operating activities- D epreciation Am ortization of bond financing costs Interest expense, net Loss on sale of assets Changes hi assets and liabilities- Accounts receivable Inventories and prepaid expenses O flm r assets, net of non-cash item s A ccounts payable Accrued expenses, credit balances and m alpractice
N et cash provided by operating activities
CAS11 FLOW S FROM IN VESTIN G AC FIVITIES: Purchases of il'*vestm ent securities Proceeds from sales and m aturities of invest)nents Investnmnt incom e and other
Net cash provided by (used in) investing activities
CASI I ];LO W S FRO M CAPITA L A N D RELATED FIN AN CIN G AC I'IVITIES: Interest paym ents Acquisitions of capital assets Principal paym ents on borrowings Paym ents to defease bonds Proceeds from bond issuance
$ 1,291,833 $ 4,660,909
9,087,399 444,458
3,222,317
(4,934,369) (1,167,670) 457,547
1,529,743
_ 93~ 90~056
(1,880,181,603) 1,862,187,658
_ __ 8AgsA~25
8,666,551 490,517
4,719,920 136,479
(5,283,335) 94,158 889,635
(109,864) _ .-
1,917,27B
-- - 16,182,248
(1,113,095,995) 1,111,446,927
__ _ 8,642,.332
_ (~ 88~82020) __ _ 6,993,_264
(8,059,363) (11,251,570) (2,720,000) (4Z008,626)
_ 6 4,785~150
(9,268,720) (10,849,213) (3,310,000)
N et cash used in capital and related financing activities . (4,254 4,!021 __ - (23,427,933)
C~a*SH FLO W S FROM N ON CAPITA L FIN A N CIN G A CT IVITIES:
Transfers to other parish funds
NET DECREASE IN CAStt AND CASH EQUIVALENTS
CASI I AND CASI 1 EQUIVALENTS, beginning of year
CASH AND CASH EQUIVALENTS, end of year
(6755~599Ol __ (641,303)
(5,038,763) 7.937.243
(893,724)
2,898~48~ $ .~:=~ ,~37~ 2~ 3
The accom panying notes are an integral part of these financial statem ents
EFFERSON PARISH HOSPITAL SERVICE DISTRICT NO. 1
1. SUM M ARY OF SIGNIFICANT ACCOUNTING POLICIES
O r~.~anization
W est Jefferson Medical Center (the Medical Center) and W est Jefferson Se rvice Corporation (the Service Corporation) operate under the jurisdiction of the Parish Council of Jefferson Parish, Louisiana (the Parish) as Jefferson Parish Hospital Service District No. I (file Se rvice District) and are exempt from Federal and state incom e taxes. The Service District reports in accordance w ith the Am erican Institute of Certified Public Accountants' "Audits of Providers of Itealth Care Services." As a governm ental entity, file Se rvice D istrict also provides certain disclosures required by the Governm ental Accounting Standards Board.
The M edical Center operates an acute care hospital, physician clinics, m edical office buildin gs and a health and fitness center. The prim ary purpose of the Se rvice Corporation is to support the activities of tile M edical
Center. It operates an outpatient imaging center (d/b/a W est Jefferson Imaging Center) and provides m anagem ent consulting services to its subsidiaries as w ell as various unrelated healthcare providers. The Se rvice Corporation subsidiaries include Omega Claims, Inc. (a claims administration service begun during 1994) and Physiciar~s Center Pharmacy, Inc. (a retail pharmacy). The Se rvice Corporation is also the leasing agent for various m edical office buildings ow ned by th e M edical Center.
The preparation of financial statem ents in conform ity w ith generally accepted accounting principles requires m anagem ent to m ake estim ates and assum ptions that affect file am ounts reported in file financial statem ents Actual results could differ from these estim ates.
The operations of all entities are in cluded in the accom panyin g com bined financial statem ents. All significant in tercom pany transactions have been elim in ated in com bination. Significant accounting policies used by th e Se rvice District in preparing and presenting its com bined financial statem ents are sum m arized below .
Cash and Cash Eouivalents
Cash and cash equivalents include investm ents in highly liquid debt instrum ents w ith a m aturity of three m onths or less, excludin g am ounts w hose use is lim ited by board designation or other arrangem ents under trust agreem ents or w ith third-party payors.
Investm ents
Effective January 1,1998, the Se rvice District implemented Governmental Accounting Standards Board Statement No. 31 (GASB 31) "Accounting and Financial Reporting for Certain Investments and for External Investm enl Pools" and, accordingly, investm ents are carried at fair value in the balance sheet and all investm ent incom e, including changes in the fair value of in vestm ents is recognized as revenue in the statem ent of revenues and expenses.
lnventor~
Inventory, which consists primarily of drugs and supplies, is stated at the lower of cost (first-in, first-out) or m arke';.
roDertv. Plant and Eouiom ent
Property, plant and equipm ent are stated at cost. Depreciation is com puted oll file straight-line basis over estim a ted useful lives as follow s:
Costs of 13orrow i~
Land im provem ents Buildings Fixed equipm ent
Major movable equipment M inor equipm ent
10 years 10-40 years 10-25 years 5-10 years
3 years
Deferred financing costs are am ortized over the period the obligation is expected to be outstanding using the interest m ethod.
O ther A ssets
O ther assets consist prim arily of tire M edical Center's 24.25% interest in a m anaged care organizalion and a 33% interest in a shared laundry co-operative, both of w hich are carried under th e equity m ethod of accounting.
N et Patient Service Revenue
The Service District has agreem ents w ith third-party payors that provide for paym ents to the Service District at am ounts different from its established rates. N et patient service revenue is reported at the estim ated net anmun~ts realizable from patients, third-party payors and others for services rendered, including estimated retroactive adjustments under reimbursement agreements. Retroactive adjustments are accrued on an estimated basis in the period the related services are rendered and adjusted in future periods as final settlem ents are determ ined. Governm ent health care program receivables include settlem ents for 1993 and
subsequent years which are subject to audit and retroactive adjustment by the intermediary and the Department of Health and tIuman Se rvices. Payment arrangements with major third-party payors are sum m arized below :
Government~Pr~ rams - Services rendered to m ost M edicare and M edicaid program beneficiaries are ]:)aid at prospectively determ ined rates or fee schedules w hich m ay vary according to a patient classification system based on clinical, diagnostic and oth er factors. Certain outpatient services and defined capital costs related to M edicare beneficiaries are paid based on a cost reim bursem ent m eth odology under w hich the Service District is paid at a tentative rate w ith final settlem ent determ ined after subm ission of annual cost reports by the Service District and audits th ereof by the fiscal interm ediary.
Com m ercial Ins urance - The Se rvice District has entered into paym ent agreem ents w ith certain com m ercial ins urance carriers, health m aintenance organizatiolts and preferred provider organizations. The basis for paym ent to the Service District under th ese agreem eots iucludes prospectively determ ined rates per discharge, discounts from established charges, prospectively determ ined daily rates and capitated per m em ber per m onth rates.
The Service District derives a significant amount (approximately 44% in 1998 and 45% in 1997) of its net patient service revenue front patients covered by th e M edicare and M edicaid program s and by M edicare health m aintenance organ~ation insurance plans. The Service District is unable to predict the future course of Federal, state and local regulation or legislation, including M edicare and M edicaid statutes and regulations. Furth er changes could have a m aterial adverse effect on the financial results of th e Service District.
Com m unity Benefits
Se rvices provided to the indigent and benefits provided to the broader com m unity by th e M edical Center for the years ended Decem ber 31,1998 and 1997 are sum m arized below :
Benefits for the Indigent (unpaid costs)- Traditional charity care
Benefits for th e Broader Com m unity- U npaid costs of M edicare program s O th er com m unity benefits
Total quantifiable benefits for the broader com m unity
Total quantifiable com nm nity benefits
1998 1997
1,572L000 .$1~643,000
2,280,000
_ _1,055,000
3,335,000
K$~ 7 0@
3,894,000
1~0021,000
4~915,000
$ 6,558~0~Q
Benefits for the indigent include services provided to persons who cannot afford healthcare because of inadequate resources or w ho are uninsured. This includes the estim ated costs of services associated w ith traditional charity care and oth er serv ices such as em ergency room services.
Benefits for the broader com m unity include the unpaid cost of treating M edicare beneficiaries in excess of government paym ents. These benefits also include serv ices provided to other needy populations that m ay not qualify as indigent but th at need special serv ices and support. Exam ples include the cost of health prom otion and education, an assistance program for the elderly, health clinics and screenings, ground am bulance and air am bulance services, and special assessm ents by the Parish to fund health care for the Parish correctional center, all of w hich benefit th e broader com nm nity.
Com nnm ity benefit expense approxim ated 4% and 5% of total Service D istrict operating expenses in 1998 and 1997, respectively.
Reclassifications
Certain reclassifications have been m ade to prior year balances in order to cmfform to the current year presentation.
N ew A econntin~: Pronouncem ents
In June, 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, Accounting for Derivative Instruments and Hedgiug activities (FAS 133). The Statement established accounting and reporting standards requiring that every derivative hlstrument be recorded in the balance sheet as either an asset or liability m easured at its fair value. The Statem ent requires that changes in th e
derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are m et. Special accounting for qualifying hedges allow s a derivative's gains and losses to offset related results on file hedged item in the incom e statem ent, and requires that a com pany m ust form ally docum ent, designate, and assess file effectiveness of transactions th at receive hedge accounting. FAS 133 is effective for fiscal years beginning after June 15,1999. The M edical Center has not yet quantified the impact of adopting FAS 133 on th e fhlancial statem ents and has not determ ined the tim ing or m eth od of the adoption of FAS 133.
AN D
AsseLs whose use is lim ited th at are required for obligations classified as current liabilities are reported in current assets. The com position of assets w hose use is lim ited at D ecem ber 31,1998 and 1997 is set forth below :
Board designated 1986 Bond Issue 198B Bond Issue 1985-A borrow ings 1993 Bond Issue 1998 Bond Issue Debt Service Reserve
Total Carrying Value (at fair value)
1998 Carrvin2 Value Cash U .S. Governm ent 1997
E~ uivalents Securities Total Total
$ 107,380 814
469,040
7,700,747 114,634
$ 134,480,835 $ 134,588,215 - 814
54,365,543 54,834,583
- 7,700,747 63,211,148 63,325,782 12,387 6~25 __ 12,38_7 6~6225
$ 183,155,847 779
54,457,106 1,269
7,337,509
$ G~92,615 $ 264,4yt5,15~1~ $ 272,837a766 $ 244,952,510
Louisiana state statutes authorize the Service District to invest in obligations of the U. S. Treasury and oth er Federal a~,encies, tim e deposits w ith state banks and national banks having th eir principal offices in th e State of Louisiana, guaranteed investm ent contracts issued by highly rated financial institutions and certain investm ents w ith qualifying nm tual or trust fund institutions. D urhlg the years ended Decem ber 31, 1998 and 1997, the Se rvice District invested prim arily in securities issued by th e U . S. Treasury and other Federal agencies. Louisiana state statutes also require that all of th e deposits of the Service District be protected by ilksurance or collateral. The m arket value of collateral pledged m ust equal 100% of the deposits not covered by insurance. The bank balances of deposits at Decem ber 31, 1998 and 1997 w ere entirely covered by insurance or collateral held by financial institutions in th e Service District's nam e.
The Service District's investm ents are categorized below to give an indication of the level of risk assum ed at
year end. Category (a) includes inveshnents that are leisured or registered or for which the securities are held by the Se rvice District or its agent in the Service District's name. Category (b) includes uninsured and unregistered investm ents for which the securities are held by th e counterparty's trust departm ent or agent in the Service District's name. Category (c) includes uninsured and unregistered investumnts for which the securities are held by the counterpar ty or by its trust departm ent or agent, but not in the Se rvice District's nam e. Balances at Decem ber 31, 1998 w ere as follow s:
Credit Risk Category
~ __ (a) (b) __ ~ Total Fair Value
U .S. Governm ent and Federal agencies' securities $ - $264,445,151 $ $ 264,445,151
M oney m arket funds and oth er cash equivalents 200,000 8,192~615
Total investments $~.~ 200,000 $27K63~77766 IK
__ ~8 3~ 5
$ 272,837J66
3. PROPERTY1 PLANT AND EQUIPM ENT
Property, plant and equipm ent at December 31,1998 and 1997 consists of:
1998 1997
Land and land im provem ents Buildings Fixed equipm ent M ovable and other equipm ent
Total Less- accum ulated depreciation
Property, plant and equipm ent, net
$ 6,072,835 60,734,123 38,630,701 91,235,834
196,673A93 ~116,616,788~ $ 80~056 7_,Z05
$ 5,806,989 58,139,168 38,630,701
832~ 20862
185,797,720 .~LQ79~ 186)
The Service District leases certain major movable and other equipment under operath~g leases with terms predom inantly on a m onth-to-m onth basis. Rental expenses for leased equipment am ounted to approximately $624,000 for 1998 and $556,000 for 1997. During 1996, the M edical Center entered into an agreem ent w hereby an outside firm m anages th e Inform ation System s function. Future com m itm ents under th is arrangement total $10,596,000 at Decem ber 31, 1998.
4. LO N G-TERM DEBT:
Long-term debt consists of
1997
Customized Purchase Revenue and Refunding Bonds (Series 1986); variable interest rates (ranging from 3.50% to 4.35% in 1998 and 1997); due in 2026 $ 48,000,000 $ 48,000,000
Louisiana Public Facilitips Authority Revenue Bonds (Series 1988); 7.9%, due in installments to 2015 ($48,000,000 of the bond proceeds were placed in escrow to advance refund the Se ries 1986 bonds)
Louisiana Public Facilities Authority CP Program H ospital Equipm ent
Financing and Refunding Revenue Bonds (Series 1985-A); variable interest rate (ranging from 4.43% to 5.75% in 1998 and 1997); due in varying principal installm ents through 2005
Hospital Revenue Bonds (se ries 1993); 3,60% - 5.40%; due in installm ents to 2019
I lospital P, evenue Bonds, (Series 1998A); 4.00% - 5.25% due in installm ents to 2022
ttospital Revenne Bonds (Se ries 1998B); variable interest rate due in installm ents to 2028
Total Less: Current m aturities
Long-term debt, less current m aturities
Total m arket value of long-term debt
10
45,664,999
15,345,000 17,000,000
51,235,000 52,300,000
41,310,000
25 000,000
180,890,000
I (2,890~ $ .!7& 0000,00~
_$~ 8_ 3,075~44B
162,964,099
. (3,515~ _000) $.!~9A49,99~
Scheduled shaking ftn~d paym ents on the Service District's long-term debt are as follow s:
1999 2000 2001 2002 2003 Thereafter
Total long-term debt
$ 2,890,000 3,190,000 3~80̀000 3,715,000 6,545,000
16~!E0̀000
$18_0~ 90̀00()
In 1985, the Medical Center issued $52,100,000 of Hospital Revenue Bonds (Se ries 1985), repayable solely from the revenues of the M edical Center. The proceeds of the issue w ere used prim arily to fin ance construction of a professional offi ce building and a garage, purchase equipm ent and advance refund the Se ries 1979 H ospital Revenue Bond issue. Proceeds in file am ount of $27,580,000 were deposited with an escrow trustee and invested in obligations secured by th e U.S. Governm ent. "ll/e principal and interest incom e from these invested funds are used to service the debt of the refunded issue. N eith er tile escrow fund nor the Se ries 1979 bonds payable are show n ira the accom panyin g balance sheets. Se ries 1979 bonds payable outstanding w ere $28,415,000 at December 31, 1998 and 1997. The Se ries 1985 bonds were advance refunded through issuance of the Series 1986 bonds and the Se ries 1993 bonds as discussed below .
In 1986.. the M edical Center issued $48,000,000 of I ]ospital Revenue and Refunding Bonds (Se ries 1986) to be repayable from the revenues of th e M edical Center. A dditioiaally, the trustee of the bond issue is entitled to draw up t~ an am ount suffi cient to pay th e outstanding principal of and up to 58 days of accrued interest on the bonds under a trans ferable irrevocab/e letter of credit. Proceeds of the Se ries 1986 Bonds were used to provide funding for certain construction and equipm ent acquisitions at th e M edical Center and advance refund certain debt issues. Approxim ately $14,807,000 in proceeds from Ibis issue and approxim ately $22,599,000 from amounts held in connection with the advance refunded Series 1979 bonds were deposited with an escrow trustee and invested in obligations secured by the U. S. Government for redemption of $30,710,000 of Series 1985 Hospital Revenue Bonds. The principal and interest from these investm ents are used to service th e advance-refunded bonds payable. Of the Se ries 1985 issue bonds w hich w ere advance- refunded, $13,340,000 and $15,000,000 ",',,as outstanding at December 31,1998 and 1997, respectively. Neither the escrow fund nor th e Series 1985 advance-refunded bonds payable are shown in the accom panyin g balance sheets.
During 1988, th e M edical Center entered into a loan agreem ent w ith the Louisiana Public Facilities Authority to obtain financing of $59,500,000 to refund th e Series 1986 bonds and finance the cost of providing improvements and equipm ent for the M edical Center. Loan proceeds of $48,000,000 were placed in escrow to provide for the future advance refunding of th e Series 1986 bonds and to fund th e debt servicing requirem ents of the related liability prior to the refundin g. Am ounts in the escrow fund w ill be used to redeem the Series 1986 bonds on any date directed by th e M edical Center on or before D ecem ber 1, 2001. Prior to redem ption of the Series 1986 bonds, the interest on borrow ed funds deposited in th e escrow fund is payable solely from investments and earnings of th e escrow fund. The Se ries 1988 Bonds were defeased in July 1998 and matured in December 1998. Air extraordinary loss on this refinancing of $2,993,997 is iucluded in the statem ent of revenues and expenses.
During 1991, th e M edical Center borrowed $20,000,000 th rough the Louisiana Public Facilities Authority CP Program Hospital Equipment Financing and Refunding Bonds (Se ries 1985-A) Program.
In January 1994, the Medical Center completed the issuance of $55,265,000 of t Iospital Revenue Bonds (Series "
1993) to provide funds to (1) advance refund $13,340,000 of fire Series 1985 Hospital Revenue Bonds, (2) advance refund $9,275,000 of the Series 1988 Bonds (3) finance acquisition, construction improvenaents, renovations and expansions of the Medical Center and (4) finance the costs incurred ira connection with the issuance of the Bonds. The "1993 Bonds have fixed rates of interest at an average yield of 5.67% and are due in varying in stallm ents th rough 2019.
11
In September 1998, the M edical Center completed the issuance of $66,310,000 of Hospital Revenue Bonds (Series 1998) consisting of $41,310,000 Fixed Rate Hospital Revenue Bonds, Series 1998A and $25,000,000 Variable Rate Hospital Revenue Bonds, Series 1998B to provide funds to 1) reimburse the Medical Center for certain capital expenditures previously incurred by the District, 2) finance the acquisition, construction improveurents, renovations and expans ions of the Medical Center and furniture, fixtures and equipment, 3) finance th e costs associated w ith the acquisition and construction of an outpatient surgical and diagnostic facility and 4) finance the cost of acquisition and construction of a family medicine facility. The Series 1998A Bonds have fixed rates of in terest at an average yield of 5.25% and are due in varying ins tallm ents th rough 202"1. The Se ries 1998B Bonds have a variable rate of in terest and are due in varying installm ents th rough 2028.
Effective October 14,1998, the M edical Center entered into a floating-to-fixed interest rate sw ap agreem ent
with an investment bank (the counterparty) on a notional amount of $25,000,000. Under this agreement, the M edical Center will m ake fixed interest paym ents at a rate of 4.42%, while receiving a floating interest payment at a rate based on TBMA index. The swap has a thirty (30) year final maturity, although after ten (10) years, if the trailing 90-day average of the TBMA exceeds 7%, the counterparty may opt to terminate the sw ap.
5. M /st.PRACTICE INSURAN CE
During 1976, the State of Louisiana enacted legislation that created a statutory limit of $500,000 for each medical professional liability claim and established the Louisiana Patient Compens ation Fund (State Insurance Fund) to provide professional liability h~surance to participating health care providers. The constitutionality of the statutory lim it has been tested and sustained to date although additional challenges m ay be m ade in the future. The Se rvice District participates ha the State Insurance Fund, w hich provides up to ~ DD,ODD coverage for settlem ent am ounts ha excess of $~DO,i~O0 per claim . "l'he Service D is~trict is self- insured with respect to the first $100,000 of each claim and has excess insurance coverage with an amanal aggregate lim it of $11,000,000 in excess of an annual deductible of $1,500,000. In addition, the Service District is insured for claims under $100,000 to the extent they exceed an annual aggregate of $500,000. M alpractice suits involving claim s of varying am ounts have been filed against the Service District by various claim ants.
These actions are in various stages of processing and some may ultimately be tried before juries. The Service District believes the ultim ate resolution of th ese claim s w ill not have a m aterial adverse effect on the Service District financial position or results of operations .
6. GOVERN M ENTAL REGULATION S
The healthcare iudustry is subject to numerous laws and regulations of Federal, state and local governnmnts. These law s and regulations include, but are not necessarily lim ited to, m atters suda as licensure, accreditation, governm ent heallhcare program participation requirem ents, reim bursem ent for patient services, and M edicare and M edicaid fraud and abuse. Govermnent activity has increased with respect to investigations and allegations concerning possible violations of fraud and abuse statutes and regulations by healthcare providers in recent years. Violations of these law s and regulations could result in expulsion from governm ent healthcare program s together w ith the im position of significant fines and penalties, as w ell as significant repaym ents for patient serv ices previously billed. M anagem ent believes th at the Service District is in com pliance w ith fraud and abuse as w ell as oth er applicable governm ent laws and regulations. Com pliance with such laws and regulations cau be subject to future government review and interpretation as well as regulatory actions unknow n or unasserted at this tim e.
Legislation and regulation at all levels of governm ent have affected and are likely to continue to affect the operation of the Service District. Federal healthcare reform legislation proposals debated in Congress in recent years have included the imposition of price controls mad/or healthcare spending budgets or targets, significant reductions in M edicare and M edicaid program reim bursem ent to hospitals and the prom otion of a restructu red delivery and paym ent system focusing on com petition am ong providers based on price and
quality, m anaged care, and steep discounting or capitated paym ent arrangem ents with m any, if not all, of tile Service District's principal payors. It is not possible at this tim e to determ ine the im pact on the Service District of goverum ent plans to reduce M edicare and M edicaid spending, governm ent im plenm ntation of national and state healthcare reform or market-initiated delivery system and/or payment methodology changes. I Iow ever, such changes could have an adverse im pact on operating results, cash flows and estim ated debt service coverage of th e Service District in future years.
7. EM PLOYEE BEN EFITS
Retirem ent Plan D escrivfion
The Service District contributes to the Retirement Plan for Employees of W est Jefferson Medical Center (the Plan) which is a single-employer, noncontributory defined benefit pension public employee retirement system (PERS) which covers substantially all employees who meet certain length of service requiremenls. The Service District's total payroll for all em ployees and th e Service District's total covered payroll for the year ended December 31, 1998, am ounted to approximately $52,154,000 and $40,632,000, respectively, and $4 9,814,000 and $40,277,000, respectively, for the year ended December 31,1997. Covered payroll refers to all com pensation paid by the Serv ice District to active em ployees covered by th e plan on w hich contributions to th e plau are based.
]'he Service District's PERS provides retirem ent benefits as w ell as death and disability benefits. Benefits do not vest until after ten years of service at w hich tinre benefits are 100% vested. The norm al form of retirem ent benefit at age 65 is an actuarially equivalent joint and 50% contingent benefit payable for life in an amount approximating the sum of (1) 1.2% of final average monthly compensation multiplied by the number of years of cred ited service not in excess of thirty and (2) .65% of final average monthly compensation in excess of "covered" com pensation m ultiplied by th e num ber of years of credited service. The Plan issues a publicly available financial report that includes financial statem ents and required supplenm ntal inform ation.
Em ployer contributions to th e Plan are invested prin aarily in equity and fixed inconm funds
Funding Status
The am ount show n below as pension benefit obligation w as determ ined as part of a~ actuarial valuation as of January 1,1999 and represents a standardized disclosure m easure of the present value of pension benefits, adjusted for the effects of projected salary increases estimated to be payable in the future as a result of employee service to date. The measure is the actuarial present value of credited projected benefits and is intended to help users assess th e Plan's funding status on a going-concern basis, assess progress m ade in aecunm latin g sufficient assets to pay benefits when due and m ake com parisons with other plans.
A m m al Pension Cost aud N et Pension O bligation
Annual required contribution Adjustment to annual required contribution
Annual pension cost Contribution m ade
Increase in net pension obligation Net pension obligation beginning of year
N et pension obligation end of year
$ 1,039,785
1,039,785 (1,039 7~Z~_85)
Significant actuarial assum ptions used in the valuation in clude a rate of return on the investm ent of present
and future asse~s of 8.5% per year, compounded annually, and projected salary increases based on merit of 5% per year.
Contributions
The fu nding policy of the PERS provides for periodic em ployer contributions at actuarially determ ined rates that are sufficient to fund norm al costs and am ortization of past service costs over 30 years. The actuarially determined contribution requirement accrued in 1998 (to be paid in 1999) was $1,039,785 and the contribution actually made in 1998 (accrued in 1997) was $911,398. The actuarial amount of assets in excess of liabilities at January 1,1999 was $893,245.
Significant actuarial assum ptions used to com pute contribution requirem ents are the same as those used to com pute file standardized m easure of the pension benefit obligation.
Trend Inform ation
tlisiorica] trend information as of January I is presented below in order to assess th e progress m ade in accumulating sufficient assets to pay pension benefits as they become payable.
A nnual Percentage N et Fiscal Year Pension of APC Pens ion Ending __ Cost (AP~ Contributed Obligation
12/31/96 12/31/97 12/31/98
$ 1,140575 911,398
1,030785
100% $ 100% 100%
The 1998 audited financial statem ents of the Plan in clude certain required supplem entary inform ation related to net actuarial value of assets and accrued liabilities, funded ratio and annual covered payroll.
Executive Benefits
The Service District provides a supplemental executive retirement plan (SERP) as well as a contributory flexible benefit plan to certain key employees. Service District contributions to the plans were $205,000 in 1998 and $254,000 in 1997. N et assets and liabilities associated with the plans were approximately $3,552,000 and $3,183,000 at December 31,1998 and 1997, respectively, and are included in current assets and liabilities in the accom panyin g fin ancial statem ents.
8. CON CENTRATIONS OF CREDIT RISK
The Service District granLs credit without collateral to its patients, m ost of whom are local residents and are insured under third-party payor agreem ents. The m ix of receivables from patients and third-party payors at Decem ber 31,1998 and 1997, w as as follow s:
M edicare M edicaid M anaged Care Oth er third-party payors Patients
27% 12% 34% 17% 10%
100%
14
24% 14% 34% 17% 11%
100%
9. "YEA R 2000" ISSU ES (UN A U DITED
The year 2000 issue is the result of shortcom ings hr m any electronic data processing system s and other equipm ent that m ay adversely affect th e Service District's operations as early as fiscal year 1999. ]'he Service District has com pleted an inventory of com puter system s th at m ay be affected by th e year 2000 issue and that are necessary to conducting the Se rvice Districfs operations. The Se rvice District has replaced its patient registration and billing system and is in th e process of replacing its financial accounting system w ith softw are products fi'om third party vendors that are year 2000 com pliant. The Service District's prim ary clinical system is year 2000 com pliant and its laboratory system will be upgraded w ith year 2000 com pliant software (also from a third party vendor) during the second quarter of 1999. The Se rvice District expects to complete rem ediation, testing and validation of all critical system s by August 1999.
The Service District has also com pleted an inventory of other electronic equipm ent includin g m edical devices, elevators, pow er system s, com m unications equipm ent, etc. and obtained confirm ations from vendors regarding year 2000 com pliance of these item s. Item s determ ined to be non-year 2000 com plaiut are expected to be replaced or upgraded durin g 1999. The Service District's preparations to ensure that all such equipm ent is year 2000 com plaint are dependent upon th e validity of vendors' colffirm ation of year 2000 com pliance of this equipm ent.
The Se rvice District is also in the process of confirming that major customers includiug the federal and state governments and major insurance companies are year 2000 ready.
Because of the unprecedented nature of the year 2000 issue, its effects and the success of related rem ediation efforts 'will not be fully determ inable until th e year 2000 and thereafter. M anagem ent cannot assure th at th e Se rvice District is or w ill be year 2000 ready, that the Se rvice District's rem ediation efforts w ill be successful in w hole or in part, or that parties w ith whom th e Se rvice District does business w ill be year 2000 ready.
15
IN DEPEN DENT AU DITORG' REPORT
REPO RT O N CO M PLIA N CE A N D O N IN TERN A L CO N TRO L O VER FIN A N CIA l, RIT.PO RTIN G BA SF, D O N A N A U DIT O F FIN AN CIA l. STA TEM EN TS PERFO RM FJ) IN
RDAN CE W ITH GOVERN M ENT AUDITIN G STAN DARDS
As part of obtaining reasonable assurance about whether the Service District's financial statem ents are free of m aterial m isstatem ent, w e perform ed tests of its com pliance w ith certain provision of law s, regulations, contracts and grants, noncom pliance w ith w hich could have a direct and m aterial effect on the deteHninatioll of financial statem ent am ounts. 1 Iow ever, providing an opinion on com pliance w ith
those provisions was not an objective of our audit and, accordingly, we do not Express such an opinim~ Tim res~Jlls of our lests disclosed no instances of noncom pliance that are required to be reported uude~ G overnm ent Auditing Standards.
nternal Control O ver Financial Reoortine.
]n planning and perform iug our audit, w e considered tim Service D istrict's internal control over financial reportilG in orde~ to determ ine our auditing procedures fol the purpose of explessing om opinion on the fiilancial statem ents and not to provide assurance on the internal control over financial reporting. O ur conside:ration of the in|ernal control over financial reporting w ould not necessarily disclose all m atters in the internal contro l over financial reporting that m ight be m aterial w eaknesses. A m aterial w eakness is a condition in w hich the design or operation of one or m ore of the internal control com ponents does not reduce 1o a relatively low level the risk that m isstatem ents in am ounts that w ould be m aterial in relation to tim financial statem ents being audited m ay occur and not be detected w ithin a tim ely period by em ployees in the norm al course of perform ing tlxeir assigned functions. W e noted no m atters involving the internal control over financial reporting and its operation that w e consider to be m aterial w eaknesses.
This report is inlended for the inform ation of the andit com m ittee and m anagem ent, how ever, this leport is a m atler of public record and its distribution is not lim ited.
N ew O rleans, Louisiana M arch 5, 1999
A RTHUR A NDERSEN LLP
RETIREM ENT PLAN FO R EM PLOYEES O F W EST JEFFERSON M EDICAL CENTER
FIN AN CIAL STATEM ENTS AS O F D ECEM BER 31,1998 AN D 1997 TO G ETH ER W ITH AUDITO RS' REPO RT
Suile 45(10
Nvw (hk'ans IA 70] :S()l 5Sl ~i!q
REPO RT OF IN DEPEN DENT PUBLIC ACCOUNTANTS
To tile Trustees of the Retirem ent Plan for Em ployees of
W est Jefferson Medical Center:
W e have audited tile accom panying financial stalem ents and supporting schedules of the Retizem ent Plan for
F, mployees of W est Jefferson Medical Center (the Plan) as of and for tile years ended December 31, 1998 and 1997. "1 hese financial statem ents and supporting schedules are tile responsibility of the Plalfs m anagem ent. O ur responsibility is to express an opinion on these financial statem ents based on our audits.
W e conducted our audits in accordance "a, ith generally accepted auditing standards and in accordance w ith tile stai~dards for financial audits contained in Government Auditing Standards (1994 Revision), issued by tile Com ptloller General of tile United States. Those standards require that w e plan and perform the audits to obtain leasonable assurance about w hether tile financial statem ents are free of m aterial m isstatem ent. A n audit it/eludes exam ining, on a test basis, evidence supporting tile am ounts and disclosures in the financial statem ents. An audit also includes assessing the accounting principles used and significant estim ates m ade by m anagem ent, as w ell as evaluating tile overall financial statem ent presentation. W e believe that our audits pIovide a reasonable basis for our opinion.
In our opinion, tile financial statem ents and supporting schedules referred to above present fairly, in a m aterial respects, tile financial status of tile Plan at Decem ber 31, 1998 and 1997 and the changes in its financial status for the years then ended in conform ity w ith generally accepted accounting principles.
In accordance w ith G overnm ent A uditing Standards, w e have also issued a report on our consideration of Jefferson Parish ltospitaI Service District No. l's compliance and internal control other financial leporting dated lvlarch 5, ]999.
N ew O rleans, I,ouisiana, M arcia 5,1999
ASSETS
RETIREM EN T Pf,A N FOR EM PLO YEES O F
W EST IEFFERSO N M EDICA L CEN TER
STATEM EN TS O F PLAN N ET A SSETS
Fixed incom e funds Equil:y funds Cash equivalents Em pIoyer contributions receivable Accrued incom e receivable
DECEM BER 31. 3998 AN D 1997
I .I ABILITII~q: Payable to em ployer for adm inistrative expenses
N ET ASSETS I IELD 1N TRUST FO R PEN SIO N BEN EFITS
$10,958,650 20,905,899 5,833,680 1,039,785
66.197
1997
$10,294,968 15,985,068 5,722,567 911,398 124,830
38,80~,211 33,038,831
2~006
$~ ,804,21! $\~3,014,825
The accom panying notes are an hltegral part of these financial statem ents
RETIREM ENT PLAN FOR EM PLOYEES OF
W EST IEFFERSO N M ED ICAL CENTER
STATEM EN TS O F CH AN GES IN PLAN N ET ASS
FOR TH E YEARS EN DED DECEM BER 31 1998 AN D 1997
ADDITIONS: Em ployer contributions Investm ent illcolne
Total additions
D ED UC I'ION S: Benefits paid to participants and beneficiaries A dm inistrative expenses
Total deductions
N ET IN CREASE
N ET ASSETS H ELD IN TRUST FOR PENSION BEN EFITS, beginning of year
N ET A SSH 'S t-IELD 1N TRUST FOR PEN SIO N BEN EFITS, end of year
$ 1,039,785 _5,542,924
$ 911,398 5,022,941_
~ 582,702 5,934,339
745,916
__ ~ 07
793,32_3
5,789,386
3~ 3 014,825
_$38j804~2!!
The accom panying notes are an integral part of these financial statem ents
642,992 37.761
680,753
5,253,586
27,761,239
$33,014,825
ETIREM EN T PLA N FO R EM PLOYEES O F
W EST IEFFERSO N M EDICA L CEN TER
N OTES TO FIN A N CIAL STATEM ENTS
O R TIIE YEARS EN DED DECEM BER 31 1998 A N D 1997
1. PLAN DESCRIf~H O N
General
W est Jefferson Medical Center operates under the jurisdiction of the Parish Council of Jefferson Parish, Louisiana (the Parish) as Jefferson Parish Hospital Service District No. 1. A Louisiana Attorney General opinion em pow ers hospital service districts to create pension plans for officers and em ployees and to completely fund the plan with district funds. The Retirement Plan for Employees of W est Jefferson M edical Center (the Plan) is a single-employer, non-contributory, defined benefit public employee retirement system (PERS). The Plan covers substantially all employees of W est Jefferson Medical Center (the Employer) wire m eet certain length of service requirem ents and is funded through em ployer contributions and investm ent earnings. A s a governm ental entity, the Plan provides disclosures required by th e Governm ental A ccounting Standards Board.
Plan M em bership
A t D ecem ber 31, the Plan's nm m bership consisted of
A ctive em ployees
Retirees and beneficiaries currently receiving benefits Term inated em ployees entitled to, but not yet receiving, benefits
Total plan participants
1998 1997
1,345 192 211
1,377 163 203
1~748 =1,743
An em ployee is eligible to participate in th e Plan as of the date he or she has com pleted one year of service and atl~ined the age of 21.
Benefits
Retirem ent
The Plan provides retirem ent benefits as w ell as death and disability benefits. A ll benefits are fully vested after 10 years of credited service. The basic aim ual retirem ent benefit at age 65 is a benefit payable for life in an am ount equal to the num ber of years of credited service up to 30 years, m ultiplied by th e sum of (1) 1.2% of final average monthly compensation and (2) .65% of final average monthly compensation in excess of "covered com pensation," which is defined as th e average of th e Social Security Taxable W age Base for the 35-year period ending the year in which social security normal retirement age is attained. Final average m onth ly com pensation is defined as th e m onthly com pensation of a participant averaged over th e 5 consecutive calendar years w hich produces th e highest m onthly average w ith in the last 10 calendar years preceding file earlier of refirexnent or term ination of em ploym ent. Em ployees w ith 10 years of credited service m ay elect to receive a reduced benefit beginning at age 55.
D eferred and D isabilitv Benefits
A Plan m em ber leaving em ploym ent after 10 years of credited service but before attaining retirenmnt age or w ho ceases active em ploym ent because of total and perm anent disability after 10 years of credited se)wice but before attaining retirem ent age is eligible for deferred benefits or m ay elect to receive reduced benefits beginning on the early retirem ent date.
Surv ivor Benefits
The survivor benefit provided under th e Plan is a death benefit for a vested participant payable in th e form of a surv ivor amm ity. Such annuity payments are generally equal to 50% of the amount which w ould be payable to file participant if he had survived and eIected to com m ence receiving a retirem ent incom e at the earliest date allowed under th e plan.
Contributions
The Em ployer is required to contribute am ounts necessary to provide th e benefits under the Plan determ ined by the application of accepted actuarial m ethods and assum ptions.
2. SU M M ARY O F SIGN IFICA N T A CCOU N TIN G A N D FIN AN CIAL REPO RTIN G PO LICIES:
Basis of A ccounting
The Plan's financial statem ents are prepared using the accrual basis of accounting
Em nlover Contributions
Em ployer contributions are recognized as revenues in th e period in w hich em ployee services are perform ed
Investm ents
The assets of the Plan are hw ested in various fixed incom e, equity and short-term m oney m arket funds m anaged by a Trustee. Investm ents are carried at fair value as reported by th e Trustee.
A ll adm inistrative expenses of the Plan are paid by th e Em ployer and are to be reim bursed by tile Plan
3. CON TRIBUTION S REOUIRED AN D CONTRIBUTION S M ADE
The funding policy of the Plan provides for periodic em ployer contributions at actuariaUy determ ined rates that are su fficienl: to pay benefits when due. The actuarial funding m eth od used to determ ine the norm al cost and th e unfunded actuarial accrued liability, am ortized over 30 years, for purposes of determ ining contribution requirem en~s is tile entry age norm al cost m ethod. The significant actuarial assum ptions underlying th e actuarial m ethod used to com pute file contribution requirements are the sam e as those used to com pute the pension benefit obligation.
4. IN VESTM ENTS:
The Plan has adopted certain investment policies, objectives, rules and guidelines which are intended to and preserve the Plan's assets w hile providing an appropriate retu rn. The targeted overall m ix of plan investmenL~ to meet these objectives are outlined below:
lnvesturent C/ass
Long-term bonds Interm ediate bonds H igh-cap equity Grow th equities M oney m arket
Target
15% 20% 45% 15% 5%
The fair value of individual investm ents that represent 5% or m ore of the Plan's total net assets as of D ecem ber 31 1998 is as follows:
Federated U . S. Governm ent Trust Institutional Fund V anguard Fixed Incom e Securities Fund Federated Grow th Strategies Fund SF3 S&P500 Index Fund The One Group U . S. Treasury Securities M oney M arket Fund
5 L A TIO
$ 6,723,675 4,234,973 2,363,013 18,542,886 5,833,680
tlistorical trend inform ation designed to provide inform ation about th e Plan's progress m ade in accum ulating sufficient assets to pay benefits w hen due is presented as Schedules I and 2.
RY
DECEM BER 31,199_8
(4) (3) Unfunded
(2) Actuarial (Overfunded) (1) Actuarial Accrued Actuarial (5)
Actuarial Value of Assets Liability Accrued Liability Funded Valuation Date ~AV~ ) AAL (UAAL) (3) - (2~ Ratio (2~t~(3~
01/01/93 01/01/94 01/01/95 01/01/96 01/01/97 01/01/98 01/01/99
$ 16,915,000 19,000,000 19,588,000 23,743,000 28,228,000 32,500,000 37,000,000
$19,973,478 22,683,471 25,934,315 27,596,935 29,532,330 34,223,220 36,106,755
$3,058,478 3,683,471 6,346,315 3,853,935 1,304,330 1,723,220
(893,245)
84.7% 83.8% 75.5% 86.0% 95.6% 95.0% 102.5%
(6) Annual Covered
__ ~ 911
$29,810,785 32,015,331 36,983,844 38,038,967 37,269,213 40,276,838 40,631,521
(7) U A AL
as Percent of
10.3% 11.5% 17.2% 10.1% 3.5% 4.3%
-2.2%
RETIREM ENT PLAN FO R EM PLOYEES O F
W EST IEFFERSON M EDICAL CENTER
REOI JIRED SUPPLEM ENTA RY IN FORM ATION
SCH EDULE OF EM PLOYER CON TRIBUTION S
Fiscal Year
1992 1993 1994 1995 1996 1997 1998
DECEM BER 31 1998
Annual Required Contribution
$ 998,714 967,683
1,047,919 1,419,308 1,140,375 911,398
1,039,785
SCH ED U LE 2
Percentage Contributed
100% 100% 100% 100% 100% 100% 100%
ETIREM ENT PLAN FOR EM PLOYEES O F
W EST IEFFERSO N M EDICAL CEN TER
N OTES TO REO U IRED SU PPLEM EN TARY IN FORM ATIO N
DECEM BER 31, 1998
The inform ation presented in the required supplem entary schedules w as determ ined as part of the actuarial valuations at the dates indicated. Additional ilfform ation as of the latest actuarial valuation follow s:
Valuation date
A ctuarial cost m eth od
Am ortization m ethod
Rem aining am ortization period
A sset valuation m eth od
Actuarial assum ptions: Investm ent rate of return
Projected salary increases Cost-of-living adjustments
January 1,1999
Entry Age N orm al
Level paym ents open
30 years
M arket value
8.50% 5.00% N one
M arch 5, 1999
To the Board of Directors of W est Jefferson M edical Center:
As part of our audit of tl~e financial statements of W est Jefferson M edical Center for the year ended Decem ber 31,1998, w e considered the M edical Center's internal control structure in determ ining the scope of our audit procedures for the purpose of rendering an opinion on the financial statem ents. W hile our purpose w as not to provide assurances on the internal control structure, w e noted the follow ing m atters that w e
w ant to report to you:
sician's Center Pharm acy Accounts Receivable Trial Balance
The Physician's Center Pharm acy does not currently m aintain a detailed accounts receivable trial balance. The balance in accounts receivable per the general ledger is calculated by netting the m onthly gross sales against cash receipts. Therefore, it is difficult to m aintain individual account balances and to determ ine unpaid account balances, W e recom m end that a detailed accounts receivable trial balance be developed at the Pharm acy to better m onitor account activity and to increase collections on unpaid accounIs.
Inform ation System s
W e recom m end that the H ospital consider im plem enting the follow ing ideas in order to
strengthen controls in the Information Systems (lS) structure:
Assess lhe risk of an IS disaster, develop a form al IS disaster plan responsive to the assessm ent, and test tl~e plan.
Docum ent change control policies and procedures, including standards for the m anagem ent of softw are and hardw are upgrades.
Conduct regular quality assurance review s of the IS departm ent to ensure that the Eclipsys perform ance is in accordance with the contract requirem ents and that departm ent policies and procedures are being follow ed. The quality assurance function should also include a regular audit of user access rights to ensure that em ployees have tl~e appropriate access and that necessary changes to access are m ade prom ptly.
j~RTHUR /~N D ER SEN
This letter is intended solely for the use of m anagem ent and the Board of Direclors and is not intended for any other purpose.
W e appreciate the courtesies and cooperation extended to our representatives during the course of our w ork. W e w ould be pleased to discuss these recom m endations in greater detail at your convenience or otherw ise assist in their im plem entation.
Very truly yours,
~6~ 6bE ~ b
fferson R E C E ! V E D A ~o~ o,o, F Ao.~ C e nter ~,,~ ,,,,cEo
er Boulevard M arrero, LA 70072
D
To the Board of Directors of W est Jefferson M edical Center
ItAY i z 1999
LLk~=vLr,,,, L, ,vul IO R
M ay T, 1999
Board of Directors:
Frank C. DNinceml, MD
LOUIS H, ] hom as. Jr.
AnthoRy S Pemn, Sr. Secrele~-l"~,a ~u,'~r
Richsrd k. BagneIto. MD Charles J. O, Gerrets Gary V. Hamilton B.H. Miller, Jr. Jack W . Owens Stanton W , Sel&the Steve J. Thedot
In response to the M aaagem ent Letter, dated M arch 5, 1999 by A~thur Andersen M anagem ent subm its the following response:
vable Trial
M anagem ent concurs with Arthur Andersen's recom m endation and will im plem ent it during 1999
M anagem ent w ill request that Eclipsys, the M edical Center's i:~form ation system s vendor, im plem ent the recom m endation to develop a disaster plan and docum ent ch~ .ge control policies and procedures. M anagement will also conduct quarterly assurance reviews of the I~form ation System s departm ent to ensure Eelipsys' performance.
M JM /jkb
]-o C U R E Som etim es To R ELIEVE O ften . To CO M FO RT Alw ays
